Gold price ends the week with 5% gain as safe-haven demand drives price action
NEW YORK (November 23) The gold market has ended a three-week selloff with a vengeance, as prices look set to close Friday above $2,700 an ounce.
Not only has gold surpassed last week’s losses, but the precious metal is also experiencing its best rally since October 2023. As of 1:40 p.m. ET, December gold futures were trading at $2,712 an ounce, up 1.39% for the week. Additionally, prices have risen 5.4% since the start of the week.
While gold has significantly rebounded since Republican candidate Donald Trump became President-elect, some analysts suggest these gains could be more fragile than they appear. The price action has been driven primarily by renewed safe-haven demand following an escalation in the War in Ukraine. The U.S. recently gave Ukraine permission to fire U.S.-made missiles into Russia, adding a new dimension to the conflict.
“Gold has very quickly recovered despite continued headwinds from a stronger dollar. Its relative performance to silver underscores why this rally has been a safe-haven rally, leading to fresh momentum buying from investors who had been waiting for a pullback,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank. “Unless we see additional action in Eastern Europe, the upside from here is probably limited until we get some clarity on Trump and Fed actions.”
However, Hansen also noted that while gold’s geopolitical safe-haven gains might not be sustainable, there remains significant bullish conviction in the market. He highlighted that most of the selling pressure in the last three weeks has come from speculators taking profits.
He added that there is little evidence of active shorting in the market.
Naeem Aslam, Chief Investment Officer at Zaye Capital Market, said he wouldn’t be surprised to see some consolidation next week as gold rallies alongside the U.S. dollar and equity markets.
“It is not normal to see both risk-on and risk-off asset classes moving in the same direction,” he said. “This is mainly due to investors reacting to the increase in geopolitical tensions around Ukraine and Russia while simultaneously remaining optimistic that things will not spiral out of control, as the President-elect has the ability to de-escalate those tensions.”
Lukman Otunuga, Manager of Market Analysis at FXTM, believes gold has room to move higher in the current environment. Alongside escalating geopolitical tensions, gold continues to benefit from dovish sentiment from the Federal Reserve. Markets currently place the odds of a rate cut next month at roughly 50/50.
“Gold is trading less than 4% away from its all-time high and could retest those levels if geopolitical tensions spark a wave of risk aversion. Additionally, the incoming U.S. PCE report and other U.S. data in the week ahead may influence the precious metal’s outlook. If soft U.S. data supports the case for a December Fed rate cut, gold bulls could gain fresh momentum,” he said. “From a technical perspective, prices need to secure a solid close above the psychological $2,700 level to pave the way for $2,750 and $2,790. Sustained weakness below $2,700 could trigger a selloff toward the 50-day SMA at $2,660 and $2,620.”
While many market participants will focus on Thursday’s Thanksgiving holiday and Black Friday sales, next week’s economic data has the potential to inject volatility into the market.
According to some economists, any weakness in consumer confidence or a disappointing revision to third-quarter GDP could solidify expectations for a rate cut. At the same time, weak inflation data in the core Personal Consumption Expenditures (PCE) Index could further support the Federal Reserve’s easing cycle, pushing gold prices higher.
While gold has seen solid gains against the U.S. dollar, some analysts suggest its true potential is revealed by its performance against the euro. Gold is ending the week above €2,600 an ounce, marking a 7% gain.
Jesse Colombo, an independent precious metals analyst and founder of the BubbleBubble Report, noted that gold remains on track to hit new all-time highs against the U.S. dollar and other major global currencies when viewed alongside its euro performance.
While some are optimistic that the U.S. economy could avoid a recession under President-elect Donald Trump’s America-First agenda, Colombo remains skeptical.
“So many people think that Trump's win means we’re ‘saved’ and that he’s going to rev up the economy and start paying down the national debt. But the reality is that he’s not a sound-money proponent,” Colombo told Kitco News. “His M.O. is to put pressure on the Fed to hold interest rates at ultra-low levels to juice asset prices and create a boom on his watch, as well as ramp up spending to make the economy appear to be booming.”
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